Prolonged COVID-19 lockdown fallout: Zero or negative growth, says Dominguez

The Duterte administration’s chief economic manager on Wednesday (April 8) said the extension of the enhanced community quarantine in Luzon will result in “zero to possibly negative 0.8-percent” Philippine economic growth in 2020.

“Definitely businesses are impacted, especially businesses in the tourism sector, as well as retail sector,” Finance Secretary Carlos G. Dominguez III said in an interview with CNBC.

“Our tax collections are definitely going to be a bit lower than our original target,” he said.

Department of Finance (DOF) estimates had shown forgone revenues to reach P286.4 billion if gross domestic product posted zero growth this year, or a bigger P318.9 billion if GDP contracted by 1 percent.

For the economy to immediately rebound post-pandemic, Dominguez said the economic team was crafting a “bounce-back” plan while currently assessing the economic damage caused by COVID-19.

“We’ve done surveys, and so far we have 40,000 respondents,” Dominguez said.

After quantifying the economic damage, he said economic officials would determine what each sector required to recover.

These included tourism, manufacturing, small and medium enterprises, big companies, consumers and banks, he added.

At the weekend, the DOF and the state planning agency National Economic and Development Authority (Neda) rolled out surveys for consumers, micro, small and medium enterprises (MSMEs), as well as businesses in the agriculture and fisheries sectors to better prepare for a so-called “new normal” once the COVID-19 outbreak was contained.

Dominguez said the economic team “will be putting together a comprehensive package” for the Philippines to quickly rebound from the socioeconomic fallout caused by COVID-19.

Earlier Neda estimates had shown full-year GDP could expand by a slower 4.3 percent at most, or, in the worst case, contract by 0.6 percent as a result of the pandemic.

In a statement on Wednesday, the United Nations Economic and Social Commission for Asia and the Pacific (Unescap) said that the pandemic was “having far-reaching economic and social consequences for the Asia-Pacific region, with strong cross-border spillover effects through trade, tourism and financial linkages.”

Unescap’s Economic and Social Survey of Asia and the Pacific 2020 report released also on Wednesday showed that COVID-19 was “the immediate risk to the region’s economic outlook, deepening the economic slowdown that was already underway.”

“Although there are significant uncertainties surrounding the pandemic, the negative impacts are likely to be substantial,” Unescap said.

Since the report contained “very preliminary forecasts based on data and information available up to March 10” or before the pandemic wreaked havoc on economies across the Asia-Pacific region, Unescap’s 2020 GDP growth forecast for the Philippines was still a high of 5.6 percent, although below the government’s earlier 6.5-7.5 percent target range.

“As the COVID-19 pandemic is still evolving rapidly and showing no signs of abating as of March 31, its negative impacts on economic performance of countries and territories in Asia and the Pacific will likely be very significant,” according to Unescap.

“As governments respond to the unprecedented health crisis and introduce economic stimulus packages, the report estimates that Asia-Pacific developing countries should increase health emergency spending by $880 million per year,” it said.

The report also called on Asia-Pacific countries to “consider establishing a regional fund to respond to future health emergencies.”

In the pandemic’s wake, the report recommended that policymakers maintain “accommodative macroeconomic policies to sustain the economic health of the region.”

“Fiscal and monetary policies should be focused on supporting affected enterprises and households and preventing economic contagion,” it said.

“Fiscal spending can also play a significant role in enhancing the ability of health responders to monitor the spread of the pandemic, care for infected people and improve health emergency preparedness,” it added.

Edited by TSB